the design of products and services

Chapter 5: Short case study 1

Copyright © 2006 Pearson Education Limited

C H AP T E R 5

The design of products and services

Short case: Boeing brings its customers on board

Arguably the most innovative new passenger aircraft to enter service over the last few years was the Boeing 777, a new twin-engined aircraft, in the 300-plus seats category, to compete with established models from McDonnell and Airbus. The existence of established competitor products is important. When Boeing developed the 747 ‘Jumbo’ jet aircraft, it had no direct competitors. The company’s customers either wanted the product or they didn’t. Not so for the 777; Boeing knew that it must consider its customers’ requirements. The company had to take a new course – to understand its customers’ needs and then to transform that knowledge into an aircraft that could best meet those needs. Boeing has always maintained close involvement with its customers, but this project called for a new depth of listening and understanding. Initially, eight large potential customers (including British Airways, Japan Airlines and Qantas) were invited to participate in creating the design concepts. It soon became clear that the customers did have important requirements, the most vital of which was that the aircraft should be around 25 per cent wider than the 767. In fact Boeing had originally hoped to lengthen the 767 fuselage to give the extra capacity, so avoiding some of the costs involved in a completely new fuselage. The customers also wanted much more flexibility in the configuration of the passenger space. Conventionally, cabin space had been divided up into sections, separated by fixed galleys and toilets at predetermined positions, fixing the ratio of passenger capacities of each class. However, the airlines all indicated that they wanted to be able to configure the cabin to their own requirements. Finally, the airlines insisted that the new design should be free of the usual level of minor, but irritating, faults which had bugged the early operations of some of the other aircraft. Boeing did meet its customers’ requirements and even improved upon them in some ways. They achieved this by using design/build teams (a concept similar to the interactive design principle described in Chapter 6), and by a particularly powerful computer-aided design (CAD) system (CAD is described in Chapter 6). Customers were closely involved right from the start of the design. They even came up with some good suggestions. For example, one airline suggested a new layout for the rear galley which allowed an extra 12 seats to be included in the aircraft.

Slack: Operations Management, 5th edition



Questions

1. What problems do you think might be associated with bringing customers together in the way that Boeing did?

2. Why do you think that Boeing’s customers wanted the flexibility to configure passenger space?




24 inches

29 inches

Can hold 2 X 22 inch bags sideways

Can hold 4 X 22 inch bags wheels first

Modifying overhead luggage bins

24 inches

29 inches

Can hold 2 X 22 inch bags sideways

Can hold 4 X 22 inch bags wheels first

Modifying overhead luggage bins

Short case: Binning boarding rage

Angela Martinez, Passenger Services Vice President of Leam Air was chairing the meeting. She knew it would be a long one. “It has always been a problem, but it has got worse since passengers have experienced some of the new Airbus-A320s,” said her deputy, “The overhead bins on the A320 are far bigger than ours with 14.5 cubic feet and a depth of a little over 29 inches. That means that they can hold four 22 inch wheeled bags put in wheels first. Our overhead bins are only 25 inches deep and so the full length of most wheeled bags just won’t go in. This means they have to be put in sideways, so the bin only holds two bags.

Leam Air has a fleet of Boeing 737s, still one of the most widely used types of airliner in the world. And, although they had been cracking down in recent years on the number and size of carry-on bags they permitted their passengers to bring onto the plane, they were still running into problems. “There is a general mistrust of checking-in baggage”, said one of Angela’s colleagues, “Why take the risk of losing a bag when you could take it on board with your? Also, not having to wait for luggage to be brought from the hold can save anything up to half-an-hour on arrival. It isn’t surprising that people would rather put their bags in the overhead bin”




The ground services manager agreed. “I don’t blame them, but we are finding that it makes boarding and getting off the aircraft a longer and more traumatic process. There have even been incidents of what we are calling ‘boarding rage’ as some passengers take too much time lifting large pieces of luggage up to the bins, finding they don’t fit and then having to search around for space to put them. Other passengers gueueing up behind them can get really frustrated. An argument broke out last month that ended in a fight and delayed the plane by an hour and a half”. New 737s were fitted with larger bins, but Leam Air’s fleet consisted entirely of older aircraft. The storage bins were perfectly robust and would last the rest of the aircraft’s life, but now it was becoming evident that they just weren’t big enough. Angela had in front of her an estimate for stripping the aircraft of their old bins and replacing them with newer and larger bins that would double the storage capacity. However, she knew that any aircraft modification could be complicated. Under no circumstances could the safety or integrity of the aircraft be compromised in any way. Only skilled staff could be allowed to work on the aircraft during the changeover so labour costs would be expensive, and the aircraft would possible be out of action for up to five days. This would be a very significant loss to the company. It would suffer from being deprived of its multi-million dollar assets and the revenue that they earned. The total cost of the changeover had been estimated at around $250,000 for each aircraft modified. However, Angela had also been approached by a company that was proposing a different and potentially cheaper solution. “I have in front of me,” said Angela, “an idea which I think could help us a lot. The Nexeng Engineering Company (NXE) say they can modify the current bins cheaply and quickly. They propose taking the door and floor of the current bins out while leaving the sides and support structure in tact and then refitting an assembly that includes extensions to the sides, a new door and a new floor (Shown in the figure). They believe that fitting an aircraft out in this way could take a much shorter time, possibly it could be done overnight, and cost less than $100,000. The point is, how should we go about evaluating this new design?”




Questions

1. How would you go about evaluating the new proposal for upgrading Leam Air’s overhead storage bins?




Short case: The manifold for the Ford Zeta engine

The development of the 1.6 Zeta engine by Ford was one of its most important design projects for years. Like any engine design, it was a huge and complex task. Indeed, each part of the engine needed to go through all the stages of the ‘concept through to market’ design activity. Take, for example, the air intake manifold. This plays a particularly important part in the engine because it re-circulates exhaust gases from the engine, reburning some of them and therefore reducing the overall emission levels from the engine. In the Zeta engine, the manifold (unusually) is made not from metal but from a glass-reinforced nylon resin. The advantages of using this material include its strength, impact resistance, heat resistance and ease of processing. However, there were many design problems to sort out, including noise and vibration, the dimensional stability of the product and the ability of the material to stand up to the very high temperatures involved. The design of the engine manifold took almost three years and was organized using all the interactive design principles. First of all, the various stages in the design were compressed and run in parallel (what Ford calls ‘concurrent engineering’). Secondly, the various fundamental design problems were sorted out right at the beginning of the process. Third, a design team was put together involving not only various personnel from the Ford Motor Company, but also the more significant suppliers. Those involved included design representatives from the Du Pont chemical company who were supplying the material, Dunlop who were to perform the moulding operation, and several specialist suppliers including Dowty who were designing the seals, Elring who were involved in gasket design, Elm Steel who were involved with supplying tubing, and so on. Design technology also played a large part in the development of this product. For example, Du Pont used CAD techniques to study the effects of engine vibration on the manifold. By simulating engine conditions, the various stress levels in the manifold could be estimated. This allowed the team to explore different design solutions without having to devote time and cost to manufacturing too many alternative prototypes – particularly important because the design of the manifold had to fit in with the overall design of the engine itself. Prototype manifolds were needed to supply the main engine design team who wanted to start engine testing several months before the end of the manifold design process. By involving its suppliers, by using them to resolve the considerable technical problems early on in the project, and by solving the technical problems in an interactive and simultaneous manner, the team managed to get a highly complex and very novel product designed to fit into the overall engine project more quickly, more cheaply and more dependably than it could otherwise have done.




Questions

1. In developing this product, Ford put together a team of suppliers. Do you think it would do the same for every single supplier of every part in every product? If not, how should it choose which suppliers, which parts and which products to subject to this sort of treatment?

2. Should Ford have included its suppliers’ suppliers as well?




Short case: The Royal Mint

A unique manufacturing operation in the UK is the Royal Mint at Llantrisant in South Wales. The Royal Mint is designated as an Executive Agency responsible to the Treasury of HM Government. The Chancellor of the Exchequer is appointed (ex officio) as Master of the Mint. Its objective is to provide the Government with coinage at a competitive price. The Royal Mint has the capacity to handle all of the UK business and still be able to bid for contracts from those countries who do not have their own minting operation. It serves over 60 countries in any one year and produces in excess of three billion coins annually. Its manufacturing requirement ranges from high volumes of standard coinage to individual service medals or commemorative coins. In the UK, the Treasury contracts with the Royal Mint on an annual basis for the likely requirements for coins in the following 12 months, and the Treasury is also responsible for decisions on any changes to the coinage. The last coin that was introduced was the new, smaller 10p coin; this involved an issue of over one billion new coins and the withdrawal of all the old coins from circulation. This represents one of the largest single projects undertaken and a massive logistics exercise to coordinate the movement of the coins. The Mint meets every three months with executives from the UK clearing banks to discuss their requirements for currency in the shorter term. These estimates are then updated at weekly planning meetings. The Mint would like to work to a ‘just-in-time’ schedule, but because of the nature of the product and the implications of the money not being available, they are obliged to keep a predetermined safety stock to cover any shortfalls. As in any manufacturing operation, the unit cost of the product is a critical factor in measuring performance, and in the case of the Royal Mint, there is a unique cost ceiling, in that their cost base must always be less than the face value of the coins being produced. Therefore, this mass manufacturing process must focus on monitoring its operating costs. The issue of payment for the product is an interesting concept within the ‘minting’ industry and in the UK. The clearing banks pay the face value of the coins to the Treasury and the annual contract agreement with the Royal Mint is based on the Treasury agreeing to cover a fixed percentage of their fixed costs and the variable cost of each unit then purchased over the year. The Royal Mint can then invoice the Treasury for the currency produced. The coins are costed in terms of pounds per thousand pieces. Of that cost, approximately 40–50 per cent comprises the raw material cost, with the next 20–40 per cent coming from the production process which transforms that raw metal into a blank coin. The actual stamping of the die onto the coin and the simultaneous milling of the edges form an almost insignificant part of the overall process cost, mainly due to the vast economies of scale at this stage. The efficiency of the stamping process is nominally determined by the life expectancy of the die, and the research at the Mint is involved in initiatives to improve the materials being used in both the coins and dies to extend this period of use. The coining machines used in the manufacturing process are flexible in that they can run to produce any of the UK and most overseas coins without long changeover periods, and orders vary from 1000 million coins for a large country to an order of 5000 for a small island. The machines are able to operate at speeds of up to 750 coins per minute and therefore the nature of a 5000 coin run is very costly, but all the same still viable. One issue has been the threat of the intrinsic raw metal cost exceeding the face value of the coin: something which has been most prevalent in those countries facing high inflation and which leads to coinage being withdrawn from circulation by those wishing to capitalize on the returns available from the base material. In the UK, the smaller denominations were reaching that point and the Mint had to change the composition of the 2p and 1p




coins to a steel core with an electroplated copper outer layer. This reduced the unit cost of the coin and also added to its expected lifetime because it used a less expensive base metal. This new format of coin represents the biggest change in the manufacturing process of coins to occur over the past few years and the pioneering of the electroplating technique, whereby a mild steel core is electroplated with copper, nickel or brass, resulted in a process which will aid the conservation of materials. The reduction in costs is also being achieved without a noticeable reduction in the recognized value of the coin. Another consequence of the electroplating procedure is that the coins have magnetic properties due to the presence of a mild steel core and this has caused initial problems for vending machine manufacturers.




Questions

1. What is the ‘concept’ of the Mint’s products?

2. Explain the criteria which the Mint will need to take into account when it designs new coinage.

3. How might the concept of simultaneous design be applied in the design of coinage?

the design of products and services

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